North American graphite producers have formally requested the U.S. government to impose a tariff as high as 920% on Chinese suppliers of the critical battery material, citing unfair trade practices by Beijing. This bold move, spearheaded by the American Active Anode Material Producers (AAAMP), is aimed at combating China's overwhelming control over the global graphite market and protecting the nascent domestic industry in the United States and Canada.
The petition, submitted to the U.S. Department of Commerce and the U.S. International Trade Commission (ITC), claims that China has been exporting natural and synthetic graphite at artificially low prices, undercutting North American competitors. These practices, the group asserts, are enabled by labor and environmental standards in China that allow its producers to rapidly scale production and dominate the market.
China's Graphite Dominance
Graphite, which constitutes the largest component by volume in an electric vehicle (EV) battery, can either be processed from natural sources or synthetically manufactured. China leads the world in the production of both types and currently holds over 95% of the global market share for battery-grade graphite.
Earlier this month, China further tightened export controls on graphite, limiting supply to the United States and intensifying trade tensions. These restrictions have prompted Western countries to accelerate efforts to diversify their supply chains and reduce reliance on Beijing for critical minerals essential to the clean energy transition.
Tariffs as a Defense Mechanism
The U.S. currently imposes a 25% tariff on most Chinese graphite, but AAAMP argues that this rate is insufficient to counteract the "malicious trade practices" of Chinese suppliers. The group contends that the current tariff can be easily absorbed by Chinese rivals, making it ineffective in protecting North American producers.
The proposed 920% tariff, if enacted, would significantly raise the cost of Chinese graphite imports and create an opportunity for domestic producers to compete. However, the petition has not yet received an official response from the Commerce Department or the ITC.
A Broader Strategy Against Chinese Imports
The call for steep tariffs comes amid heightened scrutiny of China's dominance in the global critical minerals sector. President-elect Donald Trump has expressed a willingness to impose broad tariffs on Chinese goods, and his advisors have advocated for measures targeting foreign critical minerals, including those tied to Beijing.
Not all U.S. companies in the critical minerals sector agree with blanket tariffs. For instance, Jervois Global (ASX: JRV), which recently shuttered the only U.S. cobalt mine before it became operational due to competition from Chinese producers, has proposed an alternative solution. The company suggests requiring manufacturers to source materials from Western suppliers rather than imposing universal tariffs.
Implications for the Global Market
If the U.S. adopts the proposed tariff, it could reshape the global graphite market. Higher import costs for Chinese graphite would encourage domestic and allied producers to ramp up production, potentially spurring investment in North America’s critical minerals industry.
Companies like NOVONIX Limited (NASDAQ: NVX, ASX: NVX) are already working to strengthen North American supply chains. NOVONIX, a leading producer of synthetic graphite, recently received a $755 million loan from the U.S. Department of Energy to build a large-scale synthetic graphite production facility in Chattanooga, Tennessee. This facility is expected to begin operations in 2025 and reduce the region's dependence on Chinese imports.
Additionally, new investments in natural graphite mining and processing could provide the U.S. with a pathway to long-term energy security. However, achieving this goal will require significant government support, streamlined permitting processes, and technological advancements to compete with China’s economies of scale.
Australia’s Role in Diversifying Supply Chains
While the U.S. battles Chinese imports through tariffs and trade cases, Australia has emerged as a key ally in the critical minerals supply chain. With vast reserves of natural graphite, rare earth elements, and high-purity silicon, Australia is positioned to play a pivotal role in reducing global dependence on China.
Companies like Syrah Resources (ASX: SYR) and Lynas Rare Earths (ASX: LYC) are leading the charge in exporting critical minerals to Western markets. Syrah, for example, operates one of the world’s largest natural graphite mines in Mozambique and is expanding its processing capabilities in the U.S.
As nations like the U.S. and Canada invest in domestic production, partnerships with Australian companies could provide an immediate solution to bridging supply chain gaps while local facilities scale up.
Looking Ahead
The AAAMP petition represents a critical step in North America’s effort to regain control over its supply chains for EV batteries and other technologies. While the 920% tariff proposal may face opposition from some sectors, it highlights the urgency of addressing China's dominance in the graphite market.
